As you know, the state of Missouri assesses a workers' compensation administrative
tax and a surcharge to maintain the fiscal integrity of the Workers' Compensation
Administrative Fund and the Second Injury Fund, respectively. In addition,
recently enacted Senate Bill 385 requires the assessment of a workers' compensation
administrative surcharge upon policyholders with workers' compensation deductible
policies. This administrative surcharge is assessed as a percentage of the
premiums that would have been paid for the deductible credit portion of these
policies. During the coming calendar year 2004, the state of Missouri will
assess a workers' compensation administrative tax of 1.0 percent,
a Second Injury Fund surcharge of 4.0 percent and a workers'
compensation administrative surcharge on deductible policies of 1.0
percent.

Our departments are pleased that we can reduce the administrative tax by
half and keep the Second Injury Fund surcharge at no more than its 2003 level.

The revenue from the administrative tax and the administrative surcharge
is used to fund the administrative expenses of the Division of Workers' Compensation.
State law requires the director of the division of workers' compensation
to estimate the amount of revenue required to administer the workers' compensation
program each year and to determine the rate of tax to be paid in the following
calendar year. If the estimated available balance of the fund on December
31 of the year the tax rate determination is made falls below 110 percent
of the previous year's expenses, the director must impose a tax not to exceed
2.0 percent. Based on the division director's assessment of the fund balance
and projected expenditures, the 1.0 percent tax levy and 1.0 percent surcharge
assessment are needed for calendar year 2004.

It is important to note that the administrative surcharge required by the
provisions of SB 385 will always be assessed at the same rate as the workers'
compensation premium tax. The administrative surcharge will be assessed at
the same time and in the same manner as the premium tax assessment, but it
is not a premium tax. The portion of a workers' compensation deductible policy
subject to the administrative surcharge will no longer be subject to the
premium tax. As a result, there should be no net impact on the revenue generated
by the new combination of the premium tax and the administrative surcharge
when compared to the previous premium tax alone. Employers that self-insure
their workers' compensation risk are not subject to the administrative surcharge.

The revenue from the Second Injury Fund surcharge assessment is used to
pay benefits from the fund. The amount of surcharge assessed must be adequate
to generate, as nearly as possible, 110 percent of the amount projected to
be paid from the Second Injury Fund in the ensuing calendar year, minus the
balance contained in the fund at the end of the previous calendar year.

State law requires the director of the division of workers' compensation
to estimate the amount of benefits payable from the Second Injury Fund during
the ensuing calendar year and to calculate the total amount of the annual
surcharge to be imposed. Based on the division director's assessment of the
fund balance and projected expenditures, this assessment will be set at 4.0
percent for 2004.

A copy of the Second Injury Fund surcharge form is available. To order
a mailed copy please call 573-526-4963.

The Department of Labor and Industrial Relations and the Department of Insurance
look forward to working with you in 2004. If you have questions or need more
information, contact the Division of Workers' Compensation at 888-837-6069
or the Department of Insurance at 800-394-0964.